2. Kwenta Governance Framework

Table of Content

1. Stakers
2. Kwenta Council
3. treasuryDAO
4. adminDAO
5. Core Contributors
6. devDAO
7. marketingDAO
8. Product Elite
9. DAO Role Compensation
10. protocolDAO

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Kwenta governance follows a democratic structure with multiple semi-independent governing bodies, each with their own goals and operational structure.

To participate in Kwenta governance, community members must be staking KWENTA.

Stakers

To become a staker, KWENTA holders can use the Kwenta staking interface to stake their tokens enabling them to acquire voting power in elections and on CKIPs. Voting power is determined by the amount of KWENTA a community member has staked (Ex. 1% of the supply is worth 1% voting power in elections and CKIPs).

Kwenta Council

Token holders will vote every 4 (four) months on 5 community members to operate the Kwenta Council. To win an election candidates must have been assigned enough voting power from stakers to be among the top five candidates with the most voting power. To become a candidate community members must nominate themselves in Discord once a nomination period has been opened by the adminDAO at the end of an epoch.

To qualify for nomination, individual must have a Discord account older than 6 months and to be a Kwenta discord member for at least 3 months.

The Kwenta Council will be responsible for voting to pass or block KIPs. Proposals must reach a majority to pass (3/5 votes). Meta-Governance proposals require n-1 votes are needed, where n is the total number of current council seats. The KIP vote window is set within 7 days.

Inactivity and Replacement

• A council member who misses at least 2 consecutive KIP votes is considered inactive.
• The remaining council members can unanimously vote to remove the inactive member(s).
• To consider a council member inactive, the KIP votes need to be at least 7 days apart and each KIP should have at least a 3 days vote window.

Filling Vacancies

• If one council seat is vacant, the nominee with the highest votes (and at least 1% of total voting power) from the last election is promoted to council member.
• If two or more seats are vacant or no suitable nominee is available, new elections are to be held within 30 days.

treasuryDAO

The treasuryDAO controls the treasury, investment, and growth funds for the Kwenta DAO, working with the adminDAO and Kwenta Council to use funds for bootstrapping the protocol and ensuring long-term sustainability. The treasuryDAO is composed of three anonymous signers where only ⅔ signers are required to send a transaction. The treasuryDAO is voted on by the Kwenta Council via a closed process. Core Contributors and Kwenta Council members would be the only community members to know who operates the treasuryDAO. At least ⅔ treasuryDAO members must be non-council members. ⅔ members must not be on the adminDAO. An election for the treasuryDAO would only be held when a rebalance of members is required, a forced election would not be held in the same cadence as the Kwenta Council. TreasuryDAO members have a maximum term life of 1 year before they need to be reelected.

adminDAO

Responsibilities

• The adminDAO is responsible for overseeing the implementation and management of the Kwenta State Log; this includes collaborating with community members to issue new KIPs as well as identifying when a KIP proposal has been completed.
• Appoint, dismiss, and identify new roles for DAO members as well as manage their corresponding grants.
• Facilitate administrative duties such as travel planning, expenses management, and governance proceedings.
• The adminDAO is responsible for stategic development and subsequent delivering on roadmap goals by coordinating with other DAO roles

The adminDAO manages all DAO roles other than the treasuryDAO (with the exception of some curation on the part of the adminDAO) and the Kwenta Council. The Core Contributors, Product Elites, marketingDAO, and devDAO will be under the purview of the adminDAO.

DAO role appointment process

In the event the adminDAO finds that an individual is needed to fill a delivery gap in the protocol, the adminDAO can either appoint someone directly or they can open an application box for a fixed period of time and select a candidate from the application box. The adminDAO is responsible for active recruitment in the event that no optimal candidate has been found. The adminDAO, in collaboration with Management Contributors, will vet candidates with whatever means they deem necessary. Compensation packages must have adminDAO, Management Contributor, and treasuryDAO approval. The adminDAO and Management Contributors must be in agreement with the decision to hire a candidate. If one party supports the hiring of a candidate while the other does not, they can bring it to the attention of the Kwenta Council where a vote can be done on whether to offer the individual the DAO role or not. The Kwenta Council and adminDAO must be in agreement in the event a Management Contributor is appointed or dismissed.

TreasuryDAO handling

Future treasuryDAO members (eg. new additions or replacements to the current treasuryDAO) will be appointed by the Kwenta Council, however, they cannot choose more than one council member to be on the treasuryDAO. The adminDAO will be responsible for confirming that the Kwenta Council did not choose more than one member on the Council as a treasuryDAO member, as treasuryDAO members are anonymous to the public, only the adminDAO, Core Contributors, and Kwenta Council will be aware of who the treasuryDAO members are.

DAO role dismissal process

In the event a DAO member needs to be dismissed from their position, driven by either the adminDAO or Management Contributors, the adminDAO, as well as the Management Contributors, must be in agreement (⅘ members of the adminDAO and Management Contributors signal their agreement) with the dismissal. If one party agrees while the other does not, they can bring it to the attention of the Kwenta Council where a vote can be done on whether they dismiss the individual or not. Once a dismissal has been approved, the individual will be given two weeks’ notice by the adminDAO. Any outstanding package agreements will be paid out if applicable and the privileges of the DAO member will be removed at the end of a two-week period. The adminDAO and Management Contributors retain the right to alter the two-week process in the event a DAO contributor has displayed malicious behavior that can harm the integrity or reputation of the DAO.

DAO role recusal process

In the event a DAO member decides to recuse themselves from their role, they will inform the adminDAO and provide two weeks' notice prior to the date of their dismissal. The adminDAO will then either open an application box or appoint someone to replace the role directly (as noted in the DAO role appointment process). Once the applicant has been selected, the new DAO member will take over the position as soon as the existing member's dismissal date has been reached. The adminDAO retains the right to directly appoint someone should they feel an ideal fit for the role is available. DAO members that properly follow the quitting procedure are eligible for a 200 sUSD reward for their compliance.

Performance review

It will fall under the adminDAO to regularly do performance evaluations in collaboration with the Management Contributors. The review will analyze DAO role output, their engagement with the community, and any other factors the adminDAO feels are worthy of consideration. It is up to the adminDAO to establish a cadence and process for performance reviews. Performance reviews help identify DAO members deserving of additional rewards as well as DAO members holding back the potential of the protocol. It is up to the adminDAO to determine how to proceed with the information obtained from performance reviews.

Performance-Based Compensation for CCs

A process for granting Core Contributors $KWENTA packages, which can fuel additional drive for development and growth. This necessitates collaboration between the adminDAO and treasuryDAO following the closure of the first governance epoch of the year. Their joint objective is to assess performance & determine the feasibility of $KWENTA package increases for existing Contributors.

The adminDAO must:

• Conduct annual evaluations in collaboration with the treasuryDAO to offer long-term $KWENTA packages to reinforce alignment.
• The adminDAO will be responsible for establishing & maintaining a review process that accounts for a Core Contributors role, responsibilities, and contributions to the protocol, which will help furnish the treasury with valuable insights.
• A KTR must be proposed delineating how much $KWENTA is being requested.
• Any $KWENTA issued will be subject to a vesting schedule. The precise vesting schedule and scheme of $KWENTA will be at the discretion of adminDAO, and based on internal policy and precedent set by previous distributions.

New role identification

As subDAOs increase in sophistication, it will become prudent to add more roles that are compensated by the DAO. The adminDAO will work with subDAOs to identify these new roles and determine if the DAO has the capacity and budget to support their establishment. A new role can be filled by direct appointment or an open application box (as noted in the DAO role appointment process).

DAO role compensation

The yield earned from staking the Kwenta treasury will be used to compensate DAO roles. It is the responsibility of the adminDAO to establish and honor DAO role grants. The treasuryDAO retains the right to adjust the amount of rewards the adminDAO has access to at any time. The adminDAO will only have the ability to assign how much a given address will get from the yield being generated by the DAO; they will not be able to custody those funds. At the end of the four-year inflationary period, the DAO will use the 20% of inflationary rewards, along with any other incentives stakers collect, allocated to the treasury to continually fund roles in the same manner as outlined above. In the event a DAO role requires a structured compensation package, the adminDAO will propose a package to the treasuryDAO who will then approve, adjust, or decline the request.

Bonuses for DAO roles

The adminDAO is responsible for identifying a productive way to distribute bonuses to DAO participants that have a strong positive impact on the DAO. Some possible examples include milestone-based bonuses for relevant DAO members or a recurring community-wide voting mechanism. The establishment of this mechanism will be the responsibility of the adminDAO members; the adminDAO can experiment with bonus structures as they see fit. The treasuryDAO will be responsible for establishing a budget for bonuses.

Individuals with multiple roles

Individuals can have multiple roles. It will be up to the adminDAO to reach a decision (⅔ in support of the motion) to assign an individual multiple roles. The only members that cannot have the same role are future additions or replacements to the treasuryDAO as they cannot also be Kwenta Council members.

adminDAO administrative and operational responsibilities

The adminDAO will be responsible for tracking and working with the treasuryDAO to compensate DAO roles when applicable for the following areas: travel expenses, software tooling stipends, benefits stipend, vacation tracking, and record-keeping. A high-level breakdown of how funds are being used can be requested from the adminDAO by the community at any time. For any information deemed sensitive (ex. an individual’s grants package, an individual’s token package, etc), community members are required to have a trusted label to access this information.

adminDAO member appointment

There are three seats available within the adminDAO. One seat is controlled by consensus of the Core Contributors, one seat is controlled via consensus of the Kwenta Council, one seat is controlled via consensus of the Management Contributors. Since adminDAO membership is not epoch-dependent, the only time a seat would be changed would be in the event consensus among one of the groups changes and a seat controlled by one of the three groups needs replacing. In the event that either the Core Contributors or Management Contributors are unable to appoint a new adminDAO member, the Kwenta Council holds the right to fill in the gap.

adminDAO recusal

In the event an adminDAO member decides to recuse themselves from their role, they will inform the Kwenta Council and provide two weeks' notice prior to the date of their dismissal. The Kwenta Council will work with whichever group has control of the given seat to coordinate on establishing a new adminDAO member. adminDAO members that properly follow the quitting procedure are eligible for a 200 sUSD reward for their compliance.

adminDAO dismissal

In the event the Kwenta Council, Core Contributors, or Management Contributors decides that their adminDAO representative member is no longer a fit for their role, they can forcefully remove someone from their role by stripping them of their ability to access adminDAO-related responsibilities. This would be done by majority ruling of the relevant subDAO for their adminDAO representative. The Kwenta Council with the respective group to find a new representative for their adminDAO seat.

adminDAO Funding

In the existing governance framework, Kwenta treasury retains complete control over all treasury assets, currently held within the multisig safes on Ethereum & Optimism. Any movement of DAO funds necessitates a passed KTR proposal for fund accessibility. This democratic process allows any group, including the current core contributors through the adminDAO, to put forth a funding proposal. In the spirit of fair treatment, the adminDAO, just as any other entity soliciting funds from the KwentaDAO, should formulate a per epoch KTR delineating a thorough funding request based on slotted deliverables. This request should offer a high-level overview of the proposed fund allocation for the ensuing six months of roadmap development. In the event funding needs unexpectedly change during the epochs course it will be necessary to submit a follow up KTR.

Core Contributors

Core Contributors are individuals that the adminDAO recognizes can provide continual value to the Kwenta protocol through their specialty. These individuals receive recurring grants from the adminDAO as a retainer for their skills and will act as resources for the devDAO PM, marketingDAO PM, and Management Contributors to deliver on their goals.

devDAO

The devDAO provides an interface where community developers can monitor open tickets with their associated reward. The Core Contributors are responsible for providing a board. A reward would only be given to a community member in the event that a pull request for a given ticket was evaluated by an auditor and merged by a Core Contributor. To facilitate future growth and engagement within the devDAO, a tiered role structure is used.

Tiers and Roles

devDAO PM

An individual that prepares tickets and handles project management for community-driven initiatives. This individual works directly with Core Contributors as well as community members to create and manage tickets, assess pull requests, support the Kwenta development community, and communicate community needs to Core Contributors. The Kwenta devDAO PM will receive a compensation package managed by the adminDAO along with Core Contributor privileges. The devDAO PM will determine if a KIP or external audit is required for a ticket to reach the completed phase. Tickets that require a KIP will be determined by whether they are cosmetic or product-level changes. Tickets that require external audits will be managed in collaboration with Core Contributors and the DAO will be responsible for covering audit costs. The devDAO PM can reserve tickets for individuals if they are confident that the developer can execute on the ticket.

0 - devDAO community member

Any Kwenta community member interested in the devDAO, who has not yet solved a ticket. devDAO community members are encouraged to set up their dev environment, participate in discussions and ask relevant questions in the respective channels. The devDAO community members have priority when claiming tickets labeled easy/good first time issue.

1- Bounty Hunter

Individuals that take on entry-level tickets. After solving the first ticket, devDAO community members earn the Bounty Hunter role. Community members with this role have access to easy to intermediate level tickets. Bounty Hunters assist with the onboarding of new devDAO community members and help out fellow community members with their tickets, if necessary. Bounty Hunters have priority when claiming tickets labeled Bounty Hunter, and can claim tier 0 tickets if no devDAO community members steps forward. Bounty Hunters completing at least 5 devDAO tickets (min. 2 intermediate) are eligible for progression to the community dev role. Role promotions are subject to the discretion of the devDAO PM.

2- Kwenta Community Dev

Vetted individuals that routinely take on intermediate to advanced tickets. These individuals are eligible for recurring compensation in addition to ticket bounty rewards, adding an element of security to their position. Recurring compensation will be issued by the adminDAO in the form of sUSD. As trusted individuals who have proven that they can deliver quality work, higher-level tickets will be reserved for them along with higher tiers of rewards. Once eligible, a Bounty Hunter rises to the ranks of a community dev. In addition to Bounty Hunter perks, Community Devs have priority when claiming tickets labeled 'Community Dev', and can claim tier 0 and tier 1 tickets if no Bounty Hunter or devDAO community member steps forward. Tickets reserved for community devs in general are of intermediate to hard difficulty; or eligible roadmap-level tickets, which require some more commitment and dedication to the devDAO. Community Devs who are up for more complex tickets might be eligible to a monthly retainer, which can come paid out either through a recurring distribution or added to appropriate tickets bounties. Retainers and a potential progression to Kwenta Core Developer status will be assessed based on a community dev's history of completed tickets.

Kwenta Core Developer

Kwenta Core Developers are Core Contributors who engage full-time with the task of developing Kwenta. Kwenta Core Developers concentrate their work on roadmap-level tickets and features. They also function as auditors for devDAO tickets. Kwenta Core Developers will receive a full grants package administered by the adminDAO.

Auditors

An Auditor will review code prior to it being merged to ensure there are no bugs and that the code meets Kwenta community standards. Rewards for auditors will be determined by the Kwenta devDAO PM on a case-by-case basis. Auditors can be trusted community members given the role by the devDAO PM, Kwenta Community Devs that were not responsible for writing the code being audited, or Core Contributors. For a ticket to pass the auditing phase, both a community auditor and Core Contributor must have audited and approved the code.

Rewards & Compensation

Rewards are issued in the form of Kwenta inflationary rewards which vest over a period of one year but can be staked while vesting to capture more rewards as well any fees/bonuses available. Compensation structure (These values are approximate, rewards are ultimately determined by Community PM and adminDAO):

• Entry-level tickets - 0.25-3 KWENTA
• Intermediate-level tickets - 3-10 KWENTA
• Advanced-level tickets - 10+ KWENTA
• Recurring compensation packages - 1k-16k sUSD/month + packages can include locked KWENTA for long-term engagements
• Custom tickets: the devDAO retains the right to use any tokens and package structures it feels effective for the development of the protocol

KWENTA will be issued with a 1 year lock-up period unless otherwise specified.

marketingDAO

The marketingDAO is managed by a marketingDAO PM which will work with other branches of the DAO to achieve growth through marketing initiatives.

marketingDAO PM

The marketingDAO PM will operate in a full-time capacity for the DAO to coordinate with the community on campaigns, bounties related to marketing, and general growth efforts for Kwenta. The marketingDAO PM will not be directly responsible for growth but will instead be responsible for facilitating the marketing initiatives within the community. The marketingDAO PM will be appointed by the adminDAO. The adminDAO is responsible for managing compensation for this role.

marketingDAO Structure

The marketingDAO PM will coordinate with the community through an incentives system they deem suitable to execute on tactics. The adminDAO supports the marketingDAO with organization, funding, and execution. The adminDAO will analyze the performance of marketingDAO members and adjust talent as needed.

Product Elite

Product Elites maintain an active role within the ecosystem offering feedback and suggestions to improve Kwenta for compensation in the form of bounties.

Core Contributors will be tasked with designing a feedback loop within the Kwenta dApp and creating the necessary infrastructure with discord to facilitate open engagement. Establishing a path for active community members to be rewarded for their engagement.

Core Contributors will define bounties as feedback is ready to be processed where community members and Product Elites will have the opportunity to review product elements and critique them for compensation.

Product Elite Tier System

Tier 1 - Community members can post feedback in Discord where Core Contributors can review and ticket relevant action items. Tips may be awarded for useful commentary. Additionally, campaigns open to the general community will offer an opportunity to participate as well. If a community member has given feedback that has been implemented or provides feedback on a continuous basis, they can earn the Kwenta Product Elite role.

Tier 2 - Product Elites are community members that have earned access to feedback grants when they become available. Community members with this role will have access to more sensitive and targeted feedback grants for upcoming products. Product Elites will be able to claim grants labeled Product Elite.

The number of available feedback slots per grant and the grant value are dependent on the task being completed.

DAO Role Compensation

Role	Amount	Frequency
Kwenta Council	2500 USD in Kwenta	Monthly
treasuryDAO	2500 USD in Kwenta	Monthly
Management Contributors	1000 USD in Kwenta	Monthly
adminDAO	1000 USD in Kwenta	Monthly

• Core Contributors, devDAO PM and marketingDAO PM receive a negotiated grants package as well as a negotiated Kwenta package via the adminDAO.

• Variable Upside Bonuses for Core Contributors: The adminDAO works with the treasuryDAO to determine a bonus structure that can fuel additional drive for development and growth

• Milestones Bonuses: As milestones are reached on the roadmap, the Core Contributors will earn milestone bonuses. The treasuryDAO will determine a budget for each epoch's milestone bounties. The adminDAO will be tasked with distributing a completed milestones bonus to relevant contributors.

All KWENTA will be issued with a 1 year lock-up period unless otherwise specified.

protocolDAO

Protocol upgrades or parameter changes require a technical understanding of the system in order to properly verify and sign off on upgrades.

Specification

A Gnosis Safe has been created with a 3/5 signing requirement. Three members are protocol engineers (CCs). The initial protocol engineers are assigned by the adminDAO. The two remaining signature bodies are the adminDAO and the Council.

This structure enables CCs to propose/verify changes necessary in a flexible manner, but also have the oversight of the adminDAO/EC. The flow is expected to happen in this manner:

1. 2 technical CCs propose (sign) an upgrade or parameter change
2. adminDAO or EC is communicated of this change and provides the final signature

In Practice

• All deployed ownable contracts will have ownership migrated from the adminDAO to the pDAO.
• All future contracts deployed by CCs will have ownership granted to the pDAO after deployment.

Availability Responsibility

Because of the responsibility held by those on this multisig there is an expectation that all members (even individual signers of adminDAO and EC) must be available within 24 hours in the event the system needs to be paused or an emergency upgrade needs to be undertaken.

In the event a signer is found to be unavailable for 24 hours (without prior notice) it is the remaining members discretion to replace this signer moving forward. This also applies the multsig signers (adminDAO and EC). Therefore, it is the responsibility of these organizations to gather the necessary signatures from their respective signing members or risk protocol ownership rights being revoked.